Abstract
The housing policies established by the Federal Home Loan Bank Board, Federal Housing Administration, and the Veterans Administration transformed the American housing market. However, these policies intentionally excluded communities of color from the postwar American housing boom by defining them as contaminants eroding national property values. Hence, racially restrictive federal housing policies established an inequitable generational trajectory for residents in communities across the United States. Public health practitioners are faced with the monumental challenge of addressing health disparities that were in part created by non–public health policies. The purpose of this article is to examine how federal housing policies historically contributed to creating the built environment and therefore establishing a foundation for health disparities. These pervasive, exclusionary policies and the generational stigma associated with this issue raise serious questions about the ethics of contemporary policies, practices, and research aimed at achieving health equity.
Housing is perhaps the ultimate nexus between the built environment and health disparities, and it has been the focus of much recent research and intervention activity looking at new approaches to old problems.
Introduction
Racial residential segregation can be defined as the physical separation of races and has often been identified as a fundamental cause of health disparities (Williams & Collins, 2001). Racial residential segregation has a long history in the United States. Although the terms describing this phenomenon have evolved (i.e., racial steering, blockbusting, redlining, etc.), the outcome remained constant: inequities in health and socioeconomic status (SES) for minorities. Although these institutionally exclusionary policies were deemed illegal nearly a half century ago, racial residential segregation remains high for African Americans in the United States (Williams & Collins, 2001).
This article historicizes the contemporary built environment by highlighting the problem facing public health professionals interested in eliminating health disparities. The article begins by providing a brief overview of the current literature regarding racial segregation and health outcomes. It then provides a historical analysis of discriminatory housing policies established by three influential federal agencies: the Federal Home Loan Bank Board (FHLBB), the Federal Housing Administration (FHA), and the Veterans Administration (VA) between 1932 and 1960. It then calls into question the ethics of the FHA appraisal and rating system that evaluated both people and property. Next it addresses the generational implications of federally subsidized residential racial segregation and the stigmatization that defined African Americans as deleterious influences on neighborhood desirability and property values—a perception that followed African Americans wherever they resided. It concludes with a discussion of ethical challenges facing the public health industry and practice implications for public health professionals, policy makers, and stakeholders.
Background
There is consensus in the research literature that neighborhood level factors influence health outcomes. Some studies have identified institutional racial residential segregation as the cause of both systemic community divestment and health disparities (Williams & Collins, 2001). Scholars have long acknowledged the correlation between the inequitable racial distribution of resources as restrictive factors for communities of color improving their SES, living in safe and affordable neighborhoods, obtaining a quality education, accessing quality health care, and improving health outcomes. Williams and Collins (2001) assert that racial disparities in SES are a direct result of “the successful implementation of institutional policies with segregation being prominent” (p. 406).
Many studies have proposed a number of theoretical frameworks to analyze the effects of racial residential segregation on health. However, Acevedo-Garcia, Lochner, Osypuk, and Subramanian (2003) assert that “health research has largely over-looked the complexity of residential segregation” (p. 217). There is a risk in oversimplifying the complexity of this phenomenon without examining its historical context. The risk entails a fundamental misattribution of the causes underlying health inequities resulting in misdirected strategies to overcome these lingering inequalities. According to Shaw-Ridley and Ridley (2010), historical “context always is essential in explaining the behavior of any phenomenon” (p. 456). What remains an underappreciated phenomenon among many public health professionals is the connection between historic racially exclusionary federal housing policies, the magnitude of the national racial stigmatization legacy they created, and the generational consequences continually endured by racial/ethnic minority communities today. To analyze the health implications of contemporary neighborhood quality without thoroughly examining federally subsidized historic housing policies ignores the government endorsement of residential segregation, and their discriminatory decision making process (Hood, 2005). Hence, without examining these exclusionary federal housing policies, it makes dismantling their generational health ramifications impossible.
Until 1950, the majority of Americans were unable to afford homeownership (Woods, 2012). Despite a long-standing American cultural aspiration to own property, this increased access to homeownership was less a by-product of hard work and more a result of governmental intervention in the private housing market. The housing policies of these federal agencies permanently altered the American housing landscape by deliberately selecting the generational demographic parameters for national mortgage lending eligibility. The mortgage policies codified by these federal agencies were profoundly anti-Black and antiurban. Overtime, these inequitable policies provided banks and homeowners with incentives to discriminate against minorities and the urban communities they inhabited.
Contextualizing a Contemporary Issue: The House That Segregation Built
The FHLBB: Mandating Lending and Appraisal Bias
The Great Depression placed both the American banking industry and housing market in grave danger. By 1933, nearly 10,000 banks failed and over 1,000 foreclosures occurred daily (Woods, 2012). Before this economic calamity, no banking credit reserve or federal deposit insurance existed. In 1932, in an effort to address these systemic national structural financial deficiencies, Congress created the FHLBB (see Figure 1). This massive federal entity consisted of four primary components. By 1939, the FHLBB had become the largest coordinated mortgage lending reserve on earth, consisting of thousands of home financing institutions, with billions of dollars in total assets. After 3 years of lending, by 1936 and under the supervision of the FHLBB, the Home Owners’ Loan Corporation (HOLC) directly lent over $3 billion to rescue over 1 million distressed urban homeowners. Ultimately, this Herculean effort stabilized a chaotic national housing market. The HOLC loan program extended to “all but 64 of the 3,072 counties of the United States” (Woods, 2012, p. 1048). Protecting this massive federal monetary investment required an equally ambitious national appraisal system. By 1944, when the HOLC officially concluded its incomparable national appraisal project, more than 5 million residential appraisals had been completed in 239 cities (Woods, 2012). The remarkable contribution the HOLC made to the national appraisal industry is undeniable. This agency’s appraisal efforts accounted for 10% of all American homes and approximately 18% of the urban housing market (Woods, 2013).
Institutional Organizational Chart
The appraisal scheme created by the HOLC evaluated people and the property they inhabited. Virtually all non-White neighborhoods were rated as “hazardous.” A direct correlation existed between a “hazardous” neighborhood rating and the mortgage terms they received. Hazardous rankings elicited the worst possible mortgage options ranging from severely restricted to none whatsoever. The HOLC negatively rated non-White communities and rewarded neighborhoods that “protected” property using racially restrictive covenants with elevated rankings. Written into property deeds, racially restrictive covenants stipulated that only a “person of the Caucasian or white race” could occupy homes except for non-White residents in a servile capacity (Freund, 2007, p. 94). So concerned with undesirable infiltration on property values were these federal officials that they conducted an infiltration survey that enumerated the non-White population in Oakland neighborhoods. In one hazardous-rated Oakland neighborhood, the presence of “six Negro families” was cited “as the region’s principal detrimental influence” (HOLC, 1937, Oakland: D14, https://dl.dropboxusercontent.com/u/3961868/HOLC%20Maps/OaklandBerkeleyHOLCmap-MED.JPG) This biased appraisal philosophy was adopted by the entire FHLBB with devastating consequences for poor and non-White Americans (Woods, 2012).
FHA: Racially Biased Mortgage Insurance System
In 1934, Congress created the FHA to eradicate underwriting mortgage risk, motivating banks to increase mortgage lending, thus making homeownership more affordable. Under this system, homeowners paid a 20% down payment and the federal government insured the remaining property value. This favorable FHA mortgage insurance program incentivized banks to adopt FHA underwriting guidelines. By reducing mandatory down payments from 50% to 20% and extending the amortization schedule from 5 to 30 years, the FHA made homeownership affordable for millions of American families (Jackson, 1985). During the 1950s and 1960s, “almost half of all” the nation’s suburban housing was subsidized by “FHA and VA financing” (Jackson, 1985, p. 215). From its inception until 1962, approximately 2% of FHA mortgage insurance was available to non-White homeowners (Quadagno, 1994).
This profound government-sponsored racial discrimination, translated as the FHA’s definition of a national housing market reserved exclusively for White people (Freund, 2007). The 1936 FHA Underwriting Manual unambiguously discriminated against non-Whites by defining them as adverse influences on property values. The “Rating of Location” section of this document stated,
The Valuator should investigate areas surrounding the location to determine whether or not incompatible racial and social groups are present, to the end that an intelligent prediction may be made regarding the possibility…of the location being invaded by such groups. If a neighborhood is to retain stability it is necessary that properties shall continue to be occupied by the same social and racial classes. (Freund, 2007, p. 158)
FHA policy makers defined the presence of non-White residents like a virus that contaminated neighborhood desirability and destroyed property values. Not only did FHA underwriting policy define non-White occupancy as deleterious influences on property values, it also mandated mechanisms to protect property from their “invasion.” Table 1 illustrates a guideline used for FHA rating of location.
Rating of Location Section of the 1936 Federal Housing Administration Underwriting Manual
Like its HOLC counterparts, the preferred FHA protective mechanism was an enforceable racially restrictive covenant. FHA officials considered racially restrictive covenants prerequisites for mortgage insurance. Their Underwriting Manual stated that where “no protection is provided against adverse influences the Valuator must not hesitate” to reject mortgage insurance applications. (Woods, 2013, p. 400) These exclusionary deed provisions were constitutional from 1917 until May 1948, when the Supreme Court invalidated their judicial enforcement in Shelley v. Kramer. For nearly 2 years after this landmark decision, FHA officials disregarded Supreme Court authority by continuing to federally insure mortgages covered by racially restrictive covenants (Hirsch, 2000). Even after FHA policy makers decided to comply with Shelley, they continued to advocate racial discrimination. In 1959, FHA policy makers argued that unless state law explicitly prohibited racial exclusion, they did not consider “it practical to prohibit discrimination in all housing assisted with an FHA-insured mortgage” (Hirsch, 2000, p. 182). That year a civil rights commission reported the FHA had not “moved very far” away from policies promoting racial segregation (Hirsch, 2000, p. 158)
VA: Racially Discriminatory GI Bill Mortgage Guarantees
The GI Bill of Rights comprised four components containing provisions for wealth creation. The most significant of these provided a federally guaranteed mortgage loan. The VA, like its FHA counterparts, never directly lent money to veterans; instead, it federally cosigned local mortgage loans. African American veterans quickly discovered that national banks considered them unacceptable financial risks. As Kathleen Frydl (2009) eloquently asserts, “The general feeling in most of the cities studied indicates that loans to Negro veterans were almost out of the question” (pp. 237-238). Between 1944 and 1955, the VA guaranteed over 3.9 million mortgage loans with less than 30,000 going to African American veterans (Woods, 2013).
The benefits of the GI Bill had generational implications. Frydl (2009) appropriately asserts, “Beneficiaries of the Bill secured significant forms of generational wealth, assets that could be inherited or leveraged to create wealth for descendants” (p. 24). Homes could be sold and inherited or their equity leveraged to finance college tuition. Monumentally influencing the national housing market for generations, by 1960, the FHA and VA federally underwrote over $102 “billion worth of home loans” that principally benefited Whites (Freund, 2007). Ultimately, between 1933 and 1978, “homeownership introduced equity into the estates of over 35 million families” (Jackson, 1985, p. 216).
Uncle Sam’s Built Environment
Sociologists have argued that for middle-class Americans, home equity accounts for approximately 66% of their total wealth portfolios. From 1940 until 2009, White rates of homeownership increased from 42% to 74% (Woods, 2013). This period witnessed African American rates of homeownership increase from 23% to 46% (Woods, 2013). Therefore, the 2009 homeownership rate for African Americans remains less than the 1950 rate of White homeownership. Moreover, between 1940 and 2009 the racial homeownership gap increased from 19% to 28%. A direct correlation exists between wealth and homeownership. One recent study found that the average White family had 20 times more wealth than their Black counterparts (Kochhar, 2011). Shapiro, Meschede, and Osoro (2013) reported on data from 1984 to 2009 indicating that the racial wealth gap between “white and African-American families nearly tripled, increasing from $85,000 to $236,500” (p. 1). Considering the vast majority of minority children are raised by single mothers, one wealth gap report found that whereas single White women have a median wealth of $41,500, the “median wealth for black and Hispanic women is $100 and $120 respectively” (Insight Center for Community Economic Development, 2010, p. 3). Additionally, this study discovered that White women between the ages of “36-49 have a median wealth of $42,600” compared to the $5 median wealth for women of color (Insight Center for Community Economic Development, 2010, p. 3). Moreover, “prior to age 50, women of color have virtually no wealth at all (Insight Center for Community Economic Development, 2010, p. 3).”
Discussion/Conclusion
The federal government established housing policies that generationally influenced the current national housing market, segregating neighborhoods along racial and socioeconomic lines. In light of the stigma associated with both neighborhoods and people labeled as hazardous, deleterious influences remain an inescapable generational dilemma for people of color. Gordon (2005) addresses the failure of the federal government in rectifying stigma related to racial residential segregation:
Simply making FHA-insured loans available to blacks did not compensate for the dramatic advantage that whites had enjoyed for decades in the home buying market . . . the end of discrimination in the FHA program failed to eliminate the view of neighborhoods racial transition and composition that the FHA’s insurance guidelines cemented in the American mind: that whites could prosper only by living separately from blacks, and that blacks moving into a neighborhood signified imminent price decline. The past acceptance of these empirically faulty characterizations as official federal policy may help account for how American metropolitan areas remain highly segregated by race. (pp. 189-190)
Although Gordon’s statement was specific to the FHA, similar systemic failure occurred within all federal agencies that dealt with housing. Now public health professionals and stakeholders are left to “create social and physical environments that promote good health for all” (U.S. Department of Health and Human Services, Office of Disease Prevention and Health Promotion, 2013).
The Fundamental Ethical Problem
Using random, poorly integrated and coordinated micro-level interventions (behavior change, building sidewalks and parks, cosmetic changes to housing developments, community gardens, etc.) as a solution or redress to health inequities is ethically questionable. It fails to illuminate underlying macro-level causes. Unfortunately, health disparities researchers and practitioners seeking to equalize the health playing field usually employ a snapshot-in-time approach to explain issues whose underlying causes are more comprehensive and have persisted for decades. Although neighborhood-level interventions are important, public health practitioners, researchers, policy makers, and health disparities industry (HDI) stakeholders (Shaw-Ridley & Ridley, 2010) cannot ignore the generational impact of exclusionary, federally imposed housing policies.
The fundamental ethical problem is underscored by four issues: (a) Seeking redress from minimally reformed government agencies that created the problem: Although overt discriminatory practices are now illegal, agencies such as HUD and FHA maintain policies and practices that are poorly enforced to remedy the needs of historically segregated neighborhoods. During urban renewal, marginalized people are displaced while luxury residences replace the dilapidated buildings. (b) Tacitly blaming the victims by funding and supporting mostly micro-level interventions: Federal agencies promote personal responsibility among marginalized citizens without eradicating the effects of their macro-level interventions. (c) Questionable public health and HDI leadership: Leaders must challenge independent system reforms and advocate for integrated health, education, medical, and legal care reform. (d) Ineffectual ethics codes: The existing codes fail to provide a framework for ethical decision making to address complex macro-level problems.
Redressing the effects of historical policies requires the collaboration of local communities, multiple disciplines, and governmental agencies. The current national agenda to reform our failing public school system provides a macro-level intervention blueprint. Under the Whole School, Whole Community, Whole Child agenda, stakeholders coordinate and integrate policy, process, and practice to achieve the best learning outcomes for all children. Housing, mortgage lenders, community development, and health/human service sectors should similarly align their policy, process, and practice priorities to achieve the best possible housing and communities for all people. The authors encourage HDI stakeholders to identify other critical opportunities for challenging the process by which we seek to eliminate housing inequalities on the road to achieving health equity in the United States and beyond.